Consumer prices saw no change, while layoffs declined, and consumer sentiment soured.
Consumer prices were flat with the Consumer Price Index for All Urban Consumers showing no movement up or down in October, after growing 0.2 percent in September, according to last week’s report from the Bureau of Labor Statistics. This was slightly below economists’ expectations for a 0.1 percent increase.
The index for all items except for the volatile food and energy categories – known as core inflation – also saw no change for the month. Specific categories did see movement in October, but much of it offset other categories’ activity. For instance, the food index rose by 0.2 percent in October, while the energy index declined by 0.1 percent.
The upshot from October’s consumer price inactivity is that inflation is softening. Is that permanent? Probably not, especially now that the Pfizer-BioNTech vaccine that was announced last week has the potential to return life and business to something approaching normal. Based on that scenario, some economists projected that we could see inflation grow by 2 percent a year from now.
Initial Jobless Claims
Looking at employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending November 7th fell to 709,000, which was 48,000 claims lower than the preceding week’s total of 757,000, the Employment and Training Administration reported last week.
The four-week moving average – regarded as a more reliable measure of jobless claims – declined to 755,250 claims, which was 33,250 claims down from the previous week’s average of 788,500.
The sizable drop is encouraging, but it is important to remember that weekly jobless claims remain at unusually high levels, Grant Thornton Chief Economist Diane Swonk noted in an interview with the New York Times.
“Technically it looks like we’re in a recovery, but we’re still so much in the hole,” she said.
Consumer outlook fell due to a one-two-punch of election jitters and COVID-19. The Index of Consumer Sentiment dropped to a score of 77 in November, which was 5.9 percent lower than October’s score of 81.8, the University Of Michigan Surveys Of Consumers reported last week.
Compared to the same period a year ago, November’s ranking was 20.5 percent below November 2019’s score of 96.8.
The Surveys of Consumers Chief Economist Richard Curtin chalked this up to a grim outlook on both sides of America’s political divide.
“The outcome of the presidential election, as well as the resurgence in COVID infections and deaths, were responsible for the early November decline,” he wrote. “Interviews conducted following the election recorded a substantial negative shift in the Expectations Index among Republicans but recorded no gain among Democrats. It is likely that Democrats’ fears about the COVID resurgence offset gains in economic expectations: 59 percent of Democrats reported that their normal life had changed to a great extent due to the coronavirus compared with just 34 percent among Republicans.”
The Index of Current Economic Conditions, which describes how Americans feel about the current state of the economy and their place in it, ticked down slightly to 85.8 in November, which was 0.1 percent below October’s score of 85.9.
However, the Index of Consumer Expectations, which measures how consumers feel the economy and their prospects will fare in the near future, reflected Curtin’s comments. The Index fell to a score of 71.3, which was 10 percent below October’s score of 79.2.
This week, we can expect:
Tuesday – Retail sales and business inventories for October from the Census Bureau; industrial production and capacity utilization from the Federal Reserve; import prices for October from the Bureau of Labor Statistics.
Wednesday – Housing starts for October from the Census Bureau and Department of Housing and Urban Development.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; existing home sales for October from the National Association of Realtors; leading economic indicators for October from The Conference Board.
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